The tail on the dog

Tax is the tail on the business dog. If you don't make any money, you are unlikely to be paying much tax.

But that doesn't mean that tax should be ignored when making business decisions. Timing in particular is crucial to getting the best tax breaks. There are some pretty generous allowances out there for purchasing capital equipment, particularly computers and the tax relief available can be brought forward a year simply by purchasing an item one day before the year-end rather than one day after.

Claiming for everything

If it's business related, put in a claim for it and let the accountant sort out what's allowable and what isn't. If you are a 40% taxpayer, even claim for all your entertaining because whilst the company will pay 20% tax on the cost, you would have suffered 40% tax on the money you would have needed to pay the cost out of your own pocket.

Two companies recipe for disaster

Big decisions should always have the tax implications considered first. The setting up of a new company for a particular project may have sound legal motives but the existence of a new business could increase the first company's tax bill even if the second company makes no profit at all.

In the meantime, in the real world of business, the profit-making company is probably subsidising the other company so it is not protected from losses anyway. Don't forget that there will be extra accounting work and administration too.

Don't let tax rule your business decisions though. If you make money, you will have a tax bill, but the important thing is to make sure the tail wags in the Inland Revenue's direction
no more than it has to.